OM Group Inc. (OMG), the world’s largest cobalt producer, set terms for $900 million of leveraged loans to fund the buyout of Germany’s Vacuumschmelze GmbH & Co. KG, according to a person with knowledge of the matter.
The financing includes a $600 million, six-year term loan B offered at 99 percent of face value with a 1.5 percent floor on the benchmark lending rates, said the person, who declined to be identified because the terms are private. The portion is split between a tranche in dollars and a tranche in euros.
OM Group plans to pay interest of 475 basis points to 500 basis points more than the London interbank offered rate for the tranche in dollars and an interest margin of 500 basis points for the portion in euros, the person said. A basis point is 0.01 percentage point.
The Cleveland-based company is also offering an interest margin of 375 basis points for a $100 million five-year term loan A, and a $200 million five-year revolving credit, said the person.
OM Group Treasurer Mike Mangan wasn’t immediately available to comment.
OM Group agreed to purchase Vacuumschmelze from One Equity Partners LLC for about 700 million euros ($1 billion). Bank of America Corp., PNC Capital Markets LLC and BNP Paribas SA have committed debt financing for the deal, according to OM Group’s statement on July 5.
The acquisition of the Hanau, Germany-based maker of advanced materials and specialty magnetics for the automotive and electronics industries is expected to be completed by the end of the third quarter, pending regulatory approvals.
In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t. A so-called term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. A term loan A is sold mainly to banks.
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